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Section 49A of the CGST Act as inseted vide Central Goods and Services Tax (Amendment) Act, 2018 is regarding the utilization of the input tax credit (ITC). The section 49A is inserted with the amendment of the CGST Act. In this Act, it is prescribed to utilize all the credit of the Integrated Tax first. Then the rest of the credit will be utilized to set off the tax liability of the taxpayer. This was introduced to save the interest of the state. Following is the text of the section 49A of the CGST Act:

“Notwithstanding anything contained in section 49, the input tax credit on account of central tax, State tax or Union territory tax shall be utilized towards payment of integrated tax, central tax, State tax or Union territory tax, as the case may be, only after the input tax credit available on account of integrated tax has first been utilized fully towards such payment.”

This Was done due to fact that settlement between centre &   respective states  shouldn’t kept pending  as huge amount was left lying stagnant with center due to IGST credit not being Utilized

As we can see in the given excel sheet, that the amount is not different in both the cases. But the tax of the SGST should be paid from the cash ledger. Even when there is credit in the CGST head. Thus this will block working capital

The conclusion derived if the IGST Input is more than IGST Output and CGST/SGST Input is less than its output and Balance CGST Input is Utilized fully by the IGST Credit Then although CGST Credit would remain but SGST liability need to be paid by Cash Only

This CGST Input will keep Increasing Every month unless You change your business system by Either Decreasing Purchase From Within the State (Local Purchase) or By Increasing your Sales outside the state (Interstate sales) ,If We want to have both Intra/Inter Sales/Purchases.

Download Excel Sheet

Author Bio

I am Rajat Solanki and Currently Studying CA and I am working at MGIRT & Co. Bangalore View Full Profile

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May 2024